Understanding some of the key features that a cryptocurrency exchange must possess.
With the booming cryptocurrency trend these days a number of initial coin offerings, as well as cryptocurrencies, have been introduced and hence the investors are looking forward to investing in them or to cash out some money from trading. However, the optimum cryptocurrency exchange which they must be used depends on a very large number of criteria based on their geographical location, cryptocurrency, initial coin offerings, and many more. Let us try to understand some of the optimum features which a cryptocurrency exchange must have in order to facilitate trading.
Pointers to keep in mind while choosing an optimal crypto exchange for trading:
Authenticity and security
In this modern world which is full of scams and frauds, it has become an inevitable need for investment so that our investment is secure enough. The recent incidents of the hacks of two of the largest crypto exchange Mt. Gox and Coincheck have left the investors in a state of dilemma as they were entitled to be two of the most secure exchanges at that point of time. Hence it has led the users to check into the security protocols of the exchange.
Mode of purchase
The method of purchasing a cryptocurrency on a particular exchange varies from exchange to exchange. Some of the most commonly used methods are PayPal, Bank transfer, debit, credit cards, and some use only cryptocurrency to make the purchase.
If the investor does not have the cryptocurrency initially then he must search for a cryptocurrency exchange which facilitates a service to exchange the Fiat currency with that of the cryptocurrency in order to enter the market. Also, the transaction time that the cryptocurrency exchange takes for the purchase must be considered. Some of the exchanges take hours while on the other hand some of them take days to weeks together.
It is very clear that a cryptocurrency exchange must be supporting a large number of crypto tokens in order to provide more number of options to the users. Almost all the crypto exchanges till date support two of the most common cryptocurrency i.e. Bitcoin and Ethereum. The number of tokens supported differs from exchange to exchange. For an instance, Binance offers a very long list of Altcoins, whereas Coinbase supports only four major cryptocurrencies.
Along with the tokens, a number of other metrics of the exchange also needs to be monitored such as the 24-hour trading volume and market capitalization as they affect the exchange rates.
P2P exchange, trading platform or broker.
There are basically 3 variations in the cryptocurrency exchanges.
Trading platforms are some of the most common kinds. Binance and Coincheck are some of the best examples. They are defined as the marketplace where the traders can buy or sell the cryptocurrencies along with a certain fee for a transaction.
Peer-to-peer exchanges connect the buyers and sellers directly for any kind of transactions between them. Cointal is one of the best examples. They basically help in resolving the network traffic and maintain a secure and a trustless system.
One of the best examples for the cryptocurrency traders is AvaTrade. The function very similar to the forex brokers where they set a particular rate and the buyers are enabled to buy from the cryptocurrency platforms.
It is one of the most important factors that need to be considered for a trader as his main intention is to make a short-term profit which highly depends on the transaction fee. The lower the transaction fee, the better. When an exchange owned token is transacted, there might be a discount on the fee. Or the exchange might have a provision of no transaction fee on the purchase but the transaction fee is only applicable for the sales.
User interface and experience.
Although the interface of the application of the cryptocurrency exchange is a relative criterion which differs from the taste of people to people. It is always better that the interface which the exchange provides, be very informative and simple so that it is easier for the newcomers to effectively understand and hence prevent mistakes during the Crypto trading.
The cryptocurrency exchanges can boost their 24-hour trading volume by giving the best interface possible for a large number of people.
In a nutshell, it is very important to balance all the factors while deciding the cryptocurrency exchange. Every cryptocurrency exchange on this planet is unique, in the way they operate, its security precautions, its network protocol, in regulating their users and building a nice user experience.
The investors must be looking for a cryptocurrency exchange which is best suitable for them and would be sustainable in a very long run.